3 HUGE Real Estate Tax Mistakes

3 HUGE Real Estate Tax Mistakes

Disclaimer: We do not provide tax, legal or accounting advice. This post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.

Filing taxes as a homeowner is not rocket science—it just feels like it. You may qualify for all of the basic deductions, but many others aren’t so obvious, and that’s when the mistakes occur and the IRS slaps you with an audit. If you want to maximize your tax benefit as a homeowner and avoid getting on the wrong side of the IRS, here are some common mistakes you’ll want to avoid.

Huge Real Estate Tax Mistake #1: Deducting the Wrong Year

That’s right, it happens more often than you think. This is because some taxing authorities operate a full tax year behind. In this case, it’s possible that you paid your 2014 taxes in 2015. So as you can see, it’s important that you don’t try to match up your 2015 property tax bill with your 2015 taxes, as the tax deduction is only for the taxes paid in that year.

You may have made energy-efficient upgrades to your home, in which case you could qualify for a tax credit—but there are a number of stipulations involved. With the residential energy property tax credit, you can write off 10 percent of the cost of energy efficient upgrades or 100 percent of the purchase cost of certain items, like electric heat pumps or natural gas furnaces. However, these improvements must meet guidelines established by the U.S. Department of Energy, and the credit cannot exceed $500 for all tax years since 2006. Remember, this is a lifetime limit and other restrictions apply.

Huge Real Estate Tax Mistake #3: Failing to Keep Your Receipts

When faced with providing documentation for your deductions, always err on the side of caution. Round up, organize and file all necessary receipts and paperwork so that you can sleep soundly at night knowing that should you face an audit, all your bases are covered. These would typically include all receipts for energy tax credits, charitable contributions, home improvements and property tax payments. The rule of thumb here is: if it has something to do with your taxes, hold on to it.

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